IMF Recommendation for Europe: Double Down on the Approach that Caused the Sovereign Debt Crisis

Many European nations face a sovereign debt crisis because of excessive spending caused by too much redistribution. The obvious – and only – solution to this crisis is to reverse the policies that caused the problem.

The International Monetary Fund has bluntly warned the European Union…it must integrate faster and more deeply in order to stop a global disaster. …Saying Europe is at a “crossroads”, the IMF’s acting director, John Lipsky, in Luxembourg for a meeting with EU finance ministers, declared: “The euro area needs to strengthen economic governance and may need to be more intrusive in terms of national structures.” …the IMF said that still “more economic and financial integration” and EU intervention in national economies is necessary. …Specifically, the report mentioned that “without political union” and fiscal transfers, “stronger governance of the euro area is indispensable.”

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It’s easy to put this down to a bunch of internationalists hoping their “grand experiment” will work, but I suspect the IMF has other reasons to champion economic suicide: some financiers stand to make a lot of money betting against the euro (or the dollar, for that matter.)

Why throw good money after bad? Why create additional moral hazards for other countries trying to decide between praying for a bailout and breaking unkeepable promises by living within their means? Greece is the right size of country to demonstrate the unavoidable consequences of social policies that rely on national debt to create the illusion of prosperity and wealth for one generation at the expense of the next.

The current Western European fast decline is not surprising because human history is about superpowers becoming stagnated irrelevant places as government -and taxation- gets more and more oppressive. Just take a look at Rome’s history and you will see that pattern. But today, with our current super communications and with very imperfect democracy -but nevertheless democracy – how can such destructive nonsense “advice” by mainstream academia and bureaucracy rule? Why so many people are still listening to such nonsense?

Well, we libertarians deserve a big part of the blame for this truly cataclysmic state of things. The monetary nature of recessions since the creation of the Federal Reserve is an obvious fact, tight money causes recessions (there may be 1 or 2 exceptions but not more).

But the sad 1929 story repeats itself today: A recession happens because of tight money, but the austrians predict a recession / depression for the exact opposite reason, loose money. When recession occurs keynesians bring loose money and become the “geniuses” that avoided the Great Depression, because the ultra libertarian austrians said that we were heading to a Great Depression so the ridiculous keynesian claim that we were on the fast track to a Great Depression becomes credible.

We are to blame because we follow the advice by bad economists like Friedman and Hayek. But we have much more to blame: For instance in South America many people that call themselves classical liberals supported the infamous south american VATs which are hidden taxes that artificially create millions of poor people that become artificially dependent on the political class money transfers “justifying” in such a way high taxes to “help the poor”. So sad.

true… not sure who said this, but it still rings true: I have absolutely no idea what my generation did to enrich our democracy. We dropped the ball. We entered a period of complacency and closed our eyes to the public corruption of our democracy.

[…] They refer to IMF “rescue programs,” yet all the evidence seems to suggest that the international bureaucracy is simply making the debt bubble bigger. We certainly don’t see any evidence that problems are getting solved. Greece is still in […]

[…] presentation. They refer to IMF “rescue programs,” yet all the evidence seems to suggest that the international bureaucracy is simply making the debt bubble bigger. We certainly don’t see any evidence that problems are getting solved. Greece is still in […]